ARAB NATIONAL INVESTMENT COMPANY (ANB INVEST)

Transcription

1 ARAB NATIONAL INVESTMENT COMPANY (ANB INVEST) A CLOSED JOINT STOCK COMPANY PILLAR III QUALITATIVE AND QUANTITATIVE DISCLOSURES AS OF 31 DECEMBER 2016

2 Index 1. General... Page 2 2. Capital Structure... Page 3 3. Capital Adequacy..Page 4 4. Risk Management.Page Risks Governance Structure.... Page Credit Risk.. Page Credit Risk Mitigation Exposure... Page Counterparty Credit Risk and off-balance Sheet Disclosure Page Market Risk Page Operational Risk....Page Liquidity Risk. Page 10 Page 1 of 10

3 1. GENERAL Arab National Investment Company (the Company ) is a closed joint stock company established and registered in Riyadh, Kingdom of Saudi Arabia under commercial registration No on Shawwal 26, 1428 H (corresponding to November 7, 2007). Under the terms of its license, the Company was segregated from its parent, Arab National Bank ( ANB ), as from the date of commencement of its commercial operations on January 12, The Company is a fully integrated Authorized Person regulated by the Rules and Regulation of Capital Market Authority ( CMA ); it is a wholly-owned subsidiary of ANB and acts as its sole investment arm. The Company is a wholly-owned subsidiary of the ANB. ANB has following subsidiaries and associates: Subsidiaries and Associates Percentage of Holding of the Bank Arab National Investment Company 100% ANB Insurance Agency 100% Al-Manzil Al-Mubarak Real Estate Financing Limited 100% Arabian Heavy Equipment Leasing Company 87.50% Saudi Home Loans Company 40% MetLife AIG ANB Cooperative Insurance Company 30% ANBI Business Gate Fund 25.47% The Company has subscribed 25.47% of the units of the ANBI Business Gate Fund amounting to SR 242 million as a seed investment. It is a closed-ended private placement real estate investment fund for a period of 5 years starting from date of closure of first offering on January 11, The fund s purpose is to acquire real estate assets, an income generating real estate property located in the city of Riyadh, out of which the fund will receive rental and hotel operating income over the fund term. The Company exercises significant influence over the fund and manages the fund through an agreement between the Page 2 of 10

4 1. GENERAL (Continued) Company as Fund Manager and the Fund unitholders. Accordingly, the Company has classified the seed investment in the fund as an investment in associate. The Company has no local or foreign subsidiaries. Further, the Company also does not jointly manage or exercise significant influence over any foreign company or has investments in private equity in which the Company owns majority of the voting rights. On Sha ban 3, 1433 (corresponding to June 23, 2012), the Company received instruction from CMA to change the legal form of the Company from a limited liability company to a closed joint stock company. Such change was approved according to the Ministerial Resolution No. 317/G dated Muharram 19, 1436 H (corresponding to November 12, 2014), and a revised commercial registration was issued on Rabi Al Awal 17, 1436 H (corresponding to January 8, 2015). The objective of the Company has been amended and approved by CMA Board of Commissioners on Muharram 28, 1437 H (corresponding to November 10, 2015) through a resolution number S/1/6/14832/15 to include dealing as a principal activity. Accordingly, the amended objectives of the Company is to conduct dealing as a principal as well as an agent; underwriting the asset management and investment banking activities, discretionary portfolio management, brokerage arranging, advising and custody activities in the Kingdom of Saudi Arabia. This includes various investment activities in Islamic and other related investments such as establishment and management of public equity portfolios, seed investments and real estate funds. The Company operates through its head office located in Riyadh and 13 investment centres across the Kingdom of Saudi Arabia. 2. CAPITAL STRUCTURE The Company s capital structure comprises of : Tier-1 capital of the Company consists of paid up share capital of SAR 400 million (consisting of 40 million shares at a par value per share of SAR 10), capital contribution in the form of statutory reserves established by appropriation of 10% of net income of the year and audited retained earnings being the net amount after appropriation of statutory reserve and deduction of zakat and income tax for the year. Tier-2 capital of the Company consists of revaluation reserve related to unrealized mark-tomarket for available for sale ( AFS ) investments considered as non-trading activities. For Quantitative disclosure on the capital structure refer to Appendix I Page 3 of 10

5 3. CAPITAL ADEQUACY The Company Board of Directors has established Risk Management Committee with the mandate to monitor and ensure that the Company has adequate capital to support all the risks inherent in its current and future business plans. The Company s capital adequacy includes identification and assessment of all types of material risks and ensures that besides having enough capital to cover these risk, adequate policies, processes and internal controls are in place to manage these risks in a timely manner. The Company has adopted Pillar I capital calculation methodologies under the Standardized approaches, in accordance with the guidelines issued by CMA. It has developed its own methodologies for assessing and allocating capital for material Pillar II risks. At the same time, stress testing scenarios are applied to arrive at stress capital ratios with a view to ensure that the Company remains adequately capitalized under stressed conditions during the economic down-turns. The Company s capital adequacy ratio is based on Pillar I and Pillar II risks for both Tier-1 and Tier-2 capital. It intends to target its capital adequacy ratio (CAR) well above CMA s minimum regulatory requirement of 1x. However, management actions trigger is set at higher than the required minimum CAR advised by CMA, wherein Risk Management Committee will review the capital adequacy position and recommend corrective action, if required. The Company as of the year end is adequately capitalised with surplus capital over and above the minimum capital requirement of the Company. For Quantitative disclosure on the capital adequacy refer to Appendix II 4. RISK MANAGEMENT 4.1 Risk Governance Structure The Company has well documented Risk Management Policy approved by its Risk Management Committee and Board of Directors. The policy provides guidelines for identification, measurement and control of relevant risks originating from the different business lines including capital estimation for each risk component under the regulatory guidelines. Risk management reporting and monitoring framework is in place which allows the senior management to monitor and analyse the risk at the Company level enabling the management to assess the risk level and trend, the sensitivity and reliability of risk management processes within the Company. Page 4 of 10

6 4. RISK MANAGEMENT (Continued) 4.1. Risk Governance Structure (Continued) Risk management Committee: The overall risk within the Company is managed under the supervision of Risk Management Committee which comprises of the CEO, Head of Operations, the CFO, the Chief Compliance Officer, and members designated by the Risk Management Group of ANB. The roles and responsibilities of Risk Management Committee are as follows: Ensure that the Company has proper risk management framework. Define the risk strategy, adopt and periodically affirm or revise the Company s risk appetite. Ratify any changes to the risk management framework including those resulting from changes to the regulatory environment, launch of new products/services or business practices. Set risk tolerances and ensure that senior management takes necessary steps to identify, measure, monitor and control these risks. Ensure that the Company remains adequately capitalized at all times and the capital is commensurate with its level of risk. Approve the ICAAP Report for adoption by the Company and submit to Board for ratification. Internal Audit : Internal audit independently monitors the effectiveness of risk management policies, procedures and internal controls through periodic testing of the design and operation of the processes related to the identification, measurement, management, monitoring and reporting of risks. The findings of such audit reviews are reported to the Committee for corrective actions. The purpose of independent review is to ensure that those who take or accept risk on behalf of the Company are not the only ones who measure, monitor and evaluate the risks. Compliance Function: The Compliance function assists in identifying, assessing, monitoring and reporting on compliance risk in matters relating to the Company, its operations and personnel conduct. Compliance function contributes in an independent manner, to the overall risk management of the Company by protecting the integrity and reputation of the Company and the staff, and in strengthening the Company's accountability and transparency through regular reporting of breaches to Compliance Committee & Audit Committee. Page 5 of 10

7 4. RISK MANAGEMENT (Continued) 4.2 Credit Risk Credit risk arises from the default of the counterparties due to inability or unwillingness to meet their obligation in relation to lending, trading, settlement or other financial transactions. From the Company s perspective, the credit risk arises due to default from counterparties with whom murabaha deposits are placed regularly and seed investment in funds which does not form part of the trading portfolio. The credit exposure of the Company is very minimal since as a matter of policy, it invests free capital in the form of murabaha deposits mostly with its parent Bank. From time to time, the Company invest with other Saudi-based banks in order to obtain competitive returns, but never with a tenor that exceed six months. The Company provide seed capital to newly created funds, but the level of seed capital is approved by the Board of Directors and not exceed 10% of any fund s initial net asset value. However, an exception in case of seed capital investment in a close ended private placement real-estate fund, whereby the Company has subscribed more than 10% of the fund s initial net asset value with prior intimation to CMA during the offering of the fund. Past Due Exposures & Specific Provisions: The Company have receivable policy in place which defines past due claims, as claims which are outstanding for more than 365 days. Against such past due claims the Company makes specific provisions depending on the number of days receivable balance outstanding. The Company makes provision in full for any exposures more than 365 days and write off the same from the books, if required. As of 31 December 2016 the Company does not have past due claims. Credit Rating Agencies: Company follows CMA guidelines with respect to credit risk exposure. The Company does not use ratings of credit rating agencies for its credit risk exposures as significant credit risk exposures are with reputed local banks where the credit risk is minimal. The Company follows the Standardized approach suggested by CMA for assessment of credit risk capital requirements where weights are assigned to respective assets and capital is computed at 14% of the risk weighted assets. Page 6 of 10

8 4. RISK MANAGEMENT (Continued) 4.3 Credit Risk Mitigation Exposure The Company during the year have not taken any collateral or guarantee related to its nontrading exposures. Company invest its cash flow during the year in financial instruments which have very minimal credit risk exposures such as murabaha deposits with local banks and own managed local funds. 4.4 Counterparty Credit Risk and off-balance Sheet Disclosure As per the policy of the Company significant amount of the capital is invested in murabaha deposits with local banks and own managed local funds. Company does not have any open positions in derivatives transactions, repos and reverse repos and securities borrowing/lending either during the year or at the balance sheet date. Counter Party Credit Risk: The Company has adopted the following approach for credit risk assessment of the counterparties with whom murabaha deposits are placed: Perform annual risk review of all the counterparties for placement of murabaha deposits, including tracking of adverse movement in the rating, financial performance, political environment etc. of counterparties Approval of counterparty limits by the Credit Department of ANB. Approval of exposure limits for new counterparties before investment. The Company has only invested in its own managed funds as a Fund Manager for which credit risk assessment is not required, as the counter party is the Company itself. Company settlement transactions process with different exchanges are such that it does not have counter party credit risk as the settlement is only executed with adequate cash balance available with the counter party. Credit Risk Mitigation: In order to mitigate the credit risk from a counterparty, the Company considered the following eligible financial collaterals which are reduced from the credit exposure: Certificate of deposits or other money market instruments issued by the relevant authorities. Debt instruments and Equity and convertibles included in one of the indices recognised by the relevant authorities. For Quantitative disclosure on the credit risk refer to Appendix III to V Page 7 of 10

9 4. RISK MANAGEMENT (Continued) 4.5 Market Risk Market risk generally arises from trading book exposure related to the positions which are held intentionally for short term resale and / or with the intent of benefiting from actual or expected short term price movements or to lock in arbitrage profit. Market risk consists of various components like interest rate risk, foreign exchange risk, equity price risk, underwriting risk, settlement risk and commodity price risk. The Company has no trading book exposure as of now and shall not take any exposure in the trading activities without explicit approval from the Board. The Company, is therefore not exposed to interest rate risk, equity price risk, excess exposure risk, counterparty risk and settlement risk. The Company is exposed to underwriting risk when it would be obliged to purchase previously issued equity and/or interest bearing financial instruments securities due to overestimation of demand for underwritten securities or sudden change in market conditions. As per CMA guidelines, the authorized person should calculate the capital requirements for the underwritten positions in accordance with the rules which apply to calculating capital requirements for the holding of such financial securities. The Company during the year has provided an underwriting commitment related to two Rights Issues of locally listed companies amounting to SAR 350 million. The Company managed to close the Rights Issue except, for the commitment rated to one company for which the Company had to purchase the balance committed right shares. Subsequently, the purchased rights shares were sold in the open market with a trading profit of SR 0.4 million. Foreign Exchange Risk: Foreign exchange risk arises out of holding open positions (whether long or short) in foreign currencies or exposure caused by the Company s foreign exchange related assets and liabilities. As per CMA guidelines, foreign exchange risk comprises both trading and non-trading activities. The Company does not trade in foreign currencies and does not hold any foreign currency denominated assets and liabilities. However, the Company receives foreign exchange revenue from brokerage and asset management businesses which is insignificant in proportion to its total revenues from brokerage and asset management businesses. Most of foreign currencies revenues are in GCC currencies which are pegged to USD, thus resulting in insignificant impact on the revenues of the Company. Considering the fact that the Company does not have any significant exposure in foreign exchange, the impact arising out of adverse movement in foreign exchange is minimal and there is no requirement to hold additional capital for foreign exchange risk. Page 8 of 10

10 4. RISK MANAGEMENT (Continued) 4.5 Market Risk (Continued) As of 31 December 2016, the Company does not have any trading portfolio therefore market risk capital requirement is zero. 4.6 Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It includes legal risk but excludes reputation and business/strategic risk. Operational risk is inherent within each and every activity or process conducted by the business. The Company identifies various sources of operational risk events within the organization. The sources of risk can be attributed to the following events: Internal fraud External fraud Employment practices and workplace safety Clients, products and business practices Damage to physical assets Business disruption and system failures Execution, delivery and process management The Company continuously strives towards updating its policies, procedures, processes and systems with a view to reduce the operational losses. At the same time, the Company s business departments monitor the actual losses or legal claims, to establish mitigation plans for avoiding or reducing such losses in the future, if possible. Further, in order to have better control over operations, each business department on a monthly basis perform Control and Risk Self-Assessment and Generic Key Risk Indicators. The results of operational findings are reported to the CEO on a monthly basis by the Risk Management Group of ANB. The Company has taken a Professional Indemnity Insurance and Directors & Officers Liability Insurance Policy from a reputed insurance company, which insures the Company for a reasonable sum. The Company has in place documented Business Continuity Planning as per ANB standards and serves to ensure that the Company has in place resources to manage unexpected crises and ensure continued effective operations Page 9 of 10

11 4. RISK MANAGEMENT (Continued) 4.6 Operational Risk (Continued) The Company follows a Basic Indicator Approach (BIA) for assessment of operational risks capital requirement. The Company computes the capital requirements at 15% of average operating income of the last three years subject to minimum of 25% of overhead expenses. The Company s operational risk capital requirement was considered at minimum of 15% of the average operating income of last three years from 2014 to 2016 in comparison to 25% of overhead expenses of For Quantitative disclosure on the Operational risk refer to Appendix VI 4.7 Liquidity Risk Disclosure Liquidity Risk is defined as the risk of losing earnings and capital due to an inability to meet obligations in a timely manner when they become due. Liquidity risk is categorized into following risks: Funding liquidity risk arises when the Company cannot fulfill its obligations because of its inability to obtain new funding. Market liquidity risk arises when the Company is unable to sell or realize specific assets without significant losses in price. For measuring the liquidity risk, both stock and flow approaches have been considered. For liquidity risk management under stock approach, the Company uses benchmark ratio of Liquid Asset / Total Assets to determine the impact the liquidity emergency situation wherein funds from the liquid assets shall be utilized to withstand the liquidity crisis. The ratio based on the 31 December 2016 balance sheet indicates comfortable position of 64.1% which means that significant assets are available to meet the contingent situation. Under flow approach, the Company measures the liquidity risk by calculating cash flow mismatches based on the maturity dates relating to all its asset and liabilities. The Company has prepared the liquidity statement based on the audited balance sheet as of 31 December 2016 and the statement shows the Company s liquidity position. Overall liquidity situation is very comfortable after measuring the liquidity risk through stock and flow approach. Thus, the Company should not hold additional capital on account of liquidity risk. For Quantitative disclosure on the Liquidity risk refer to Appendix VII Page 10 of 10

12 App 1: Disclosure on Capital Base Capital Base Tier-1 capital Paid-up capital 400, ,000 Audited retained earnings 249, ,844 Share premium - - Reserves (other than revaluation reserves) 40,644 37,367 Tier-1 capital contribution 689, ,211 Deductions from Tier-1 capital - - Total Tier-1 capital 689, ,211 Tier-2 capital Subordinated loans - - Cumulative preference shares - - Revaluation reserves 9,394 8,835 Other deductions from Tier-2 (-) - - Deduction to meet Tier-2 capital limit (-) - - Total Tier-2 capital 9,394 8,835 TOTAL CAPITAL BASE 699, ,046

13 App II: Disclosure on Capital Adequacy Exposure Class Exposures before CRM Net Exposures after CRM Risk Weighted Assets Capital Requirement 2016 Credit Risk On-balance Sheet Exposures Governments and Central Banks - Authorised Persons and Banks 471, ,242 99,924 13,989 Corporates - Retail - Investments 263, , , ,792 Securitisation - Margin Financing - Other Assets 24,857 24,857 68,872 9,642 Total On-Balance sheet Exposures 759, ,710 1,153, ,423 Off-balance Sheet Exposures OTC/Credit Derivatives - Repurchase agreements - Securities borrowing/lending - Commitments 13,059 13,059 93,241 13,054 Other off-balance sheet exposures - Total Off-Balance sheet Exposures 13,059 13,059 93,241 13,054 Total On and Off-Balance sheet Exposures 772, ,769 1,246, ,477 Prohibited Exposure Risk Requirement 47,689 47, ,743 20,964 Total Credit Risk Exposures 820, ,458 1,396, ,441 Market Risk Interest rate risks Equity price risks Risks related to investment funds Securitisation/resecuritisation positions Excess exposure risks Settlement risks and counterparty risks Foreign exchange rate risks Commodities risks. Total Market Risk Exposures Long Position Short Position - Operational Risk 19,520 Minimum Capital Requirements 214,961 Surplus/(Deficit) in capital 484,352 Total Capital ratio (time) 3.25

14 App II: Disclosure on Capital Adequacy Exposure Class Exposures before CRM Net Exposures after CRM Risk Weighted Assets Capital Requirement 2015 Credit Risk On-balance Sheet Exposures Governments and Central Banks - Authorised Persons and Banks 436, ,576 87,315 12,224 Corporates - Retail - Investments 275, ,843 1,038, ,384 Securitisation - Margin Financing - Other Assets 25,818 25,818 78,018 10,923 Total On-Balance sheet Exposures 738, ,237 1,203, ,530 Off-balance Sheet Exposures OTC/Credit Derivatives - Repurchase agreements - Securities borrowing/lending - Commitments 1,875 1,875 13,388 1,874 Other off-balance sheet exposures - Total Off-Balance sheet Exposures 1,875 1,875 13,388 1,874 Total On and Off-Balance sheet Exposures 740, ,112 1,217, ,405 Prohibited Exposure Risk Requirement 69,047 69, ,852 40,019 Total Credit Risk Exposures 809, ,159 1,503, ,424 Market Risk Interest rate risks Equity price risks Risks related to investment funds Securitisation/resecuritisation positions Excess exposure risks Settlement risks and counterparty risks Foreign exchange rate risks Commodities risks. Total Market Risk Exposures Long Position Short Position - Operational Risk 20,076 Minimum Capital Requirements 230,500 Surplus/(Deficit) in capital 450,546 Total Capital ratio (time) 2.95

15 App III: Disclosure on Credit Risk's Risk Weight Risk Weights Governments and central banks Administrative bodies and NPO Authorised persons and banks Exposures after netting and credit risk mitigation Margin Financing Corporates Retail Past due items Investments Securitisation Other assets Off-balance sheet commitments Total Exposure after netting and Credit Risk Mitigation 2016 Total Risk Weighted Assets 0% % , ,876 93,375 50% 100% 150% - - 4,366-19,416-4,346-28,128 42, % - 300% - 21,678-20,218-41, , % - 222, , , % - 714% (include prohibited - 47, ,059 60, ,684 exposure) Average Risk Weight Deduction from Capital Base - 195,441

16 App III: Disclosure on Credit Risk's Risk Weight Risk Weights Governments and central banks Administrative bodies and NPO Authorised persons and banks Exposures after netting and credit risk mitigation Margin Financing Corporates Retail Past due items Investments Securitisation Other assets Off-balance sheet commitments Total Exposure after netting and Credit Risk Mitigation 2015 Total Risk Weighted Assets 0% % , ,576 87,315 50% - 100% - 150% - 18,921 18,921 28, % - 300% - 17,614-25,588-43, , % - 239, , , % - 714% (include prohibited - 69, ,874 71, ,492 exposure) Average Risk Weight Deduction from Capital Base 210,424

17 App IV: Disclosure on Credit Risk's Rated Exposure Long term Ratings of counterparties 2016 Credit quality step Unrated Exposure Class S&P AAA TO AA- A+ TO A- BBB+ TO BBB- BB+ TO BB- B+ TO B- CCC+ and below Unrated Fitch AAA TO AA- A+ TO A- BBB+ TO BBB- BB+ TO BB- B+ TO B- CCC+ and below Unrated Moody's Aaa TO Aa3 A1 TO A3 Baa1 TO Baa3 Ba1 TO Ba3 B1 TO B3 Caa1 and below Unrated Capital Intelligence AAA AA TO A BBB BB B C and below Unrated Total On and Off-balance-sheet Exposures Governments and Central Banks Authorised Persons and Banks* Corporates Retail Investments - 311, ,300 Securitisation Margin Financing Other Assets - 21,999 21,999 Total - 333, ,299 Short term Ratings of counterparties 2016 Credit quality step Unrated Exposure Class S & P A-1+, A-1 A-2 A-3 Below A-3 Unrated Fitch F1+, F1 F2 F3 Below F3 Unrated Moody s P-1 P-2 P-3 Not Prime Unrated Capital Intelligence A1 A2 A3 Below A3 Unrated Total On and Off-balance-sheet Exposures Governments and Central Banks - Authorised Persons and Banks* , ,242 Corporates - Retail - - 2,825 2,825 Investments - Securitisation - Margin Financing - Other Assets ,092 13,092 Total , ,159 * Amount pertains to credit risk exposures in one of the local bank which is rated externaly by the agency as A. However, creding rating is not used and it is risk weighted as 20% as per CMA guidelines.

18 App IV: Disclosure on Credit Risk's Rated Exposure Long term Ratings of counterparties 2015 Credit quality step Unrated Exposure Class S&P AAA TO AA- A+ TO A- BBB+ TO BBB- BB+ TO BB- B+ TO B- CCC+ and below Unrated Fitch AAA TO AA- A+ TO A- BBB+ TO BBB- BB+ TO BB- B+ TO B- CCC+ and below Unrated Moody's Aaa TO Aa3 A1 TO A3 Baa1 TO Baa3 Ba1 TO Ba3 B1 TO B3 Caa1 and below Unrated Capital Intelligence AAA AA TO A BBB BB B C and below Unrated Total On and Off-balance-sheet Exposures Governments and Central Banks Authorised Persons and Banks* - 300, ,000 Corporates Retail Investments - 275, ,843 Securitisation Margin Financing Other Assets - 80,594 80,594 Total - 656, ,437 Short term Ratings of counterparties 2015 Credit quality step Unrated Exposure Class S & P A-1+, A-1 A-2 A-3 Below A-3 Unrated Fitch F1+, F1 F2 F3 Below F3 Unrated Moody s P-1 P-2 P-3 Not Prime Unrated Capital Intelligence A1 A2 A3 Below A3 Unrated Total On and Off-balance-sheet Exposures Governments and Central Banks - Authorised Persons and Banks* , ,631 Corporates - Retail - Investments - Securitisation - Margin Financing - Other Assets ,091 16,091 Total , ,722 * Amount pertains to credit risk exposures in one of the local bank which is rated externaly by the agency as A. However, creding rating is not used and it is risk weighted as 20% as per CMA guidelines.

19 App V: Disclosure on Credit Risk Mitigation (CRM) Exposure Class Exposures before CRM Exposures covered by Guarantees/ Credit derivatives Exposures covered by Financial Collateral Exposures covered by Netting Agreement Exposures covered by other eligible collaterals Exposures after CRM Credit Risk On-balance Sheet Exposures Governments and Central Banks Authorised Persons and Banks 471, ,242 Corporates Retail 2,825-2,825 Investments 311, ,300 Securitisation Margin Financing Other Assets 22,032-22,032 Total On-Balance sheet Exposures 807, ,399 Off-balance Sheet Exposures OTC/Credit Derivatives Exposure in the form of repurchase agreements Exposure in the form of securities lending Exposure in the form of commitments 13,059-13,059 *Other Off-Balance sheet Exposures Total Off-Balance sheet Exposures 13,059-13,059 Total On and Off-Balance sheet Exposures 820, ,458 * Refer to Chapter 2 of Annex 3.

20 App V: Disclosure on Credit Risk Mitigation (CRM) Exposure Class Exposures before CRM Exposures covered by Guarantees/ Credit derivatives Exposures covered by Financial Collateral Exposures covered by Netting Agreement Exposures covered by other eligible collaterals Exposures after CRM Credit Risk On-balance Sheet Exposures Governments and Central Banks Authorised Persons and Banks 436, ,631 Corporates Retail Investments 275, ,843 Securitisation Margin Financing Other Assets 94,810-94,810 Total On-Balance sheet Exposures 807, ,284 Off-balance Sheet Exposures OTC/Credit Derivatives Exposure in the form of repurchase agreements Exposure in the form of securities lending Exposure in the form of commitments 1,875-1,875 *Other Off-Balance sheet Exposures Total Off-Balance sheet Exposures 1,875-1,875 Total On and Off-Balance sheet Exposures 809, ,159 * Refer to Chapter 2 of Annex 3.

21 App VI: Disclosure on Operational Risk 2016 Gross Operating Income Average Gross Risk Capital Capital Operational Risk Operating Income Charge % Requirement 1. BASIC INDICATOR APPROACH 135, , , , ,393 CORPORATE FINANCE RESEARCH AND ADVISORY TRADING AND SALES CUSTODY ASSET MANAGEMENT STANDARDISED APPROACH - Risk Capital Capital OVERHEAD EXPENSES (Year 2016) Charge % Requirement 3. EXPENDITURE BASED APPROACH 78, ,520 CAPITAL REQUIREMENT FOR OPERATIONAL RISK - Higher of 1 & 3 19,393

22 App VI: Disclosure on Operational Risk 2015 Gross Operating Income Average Gross Risk Capital Capital Operational Risk Operating Income Charge % Requirement 1. BASIC INDICATOR APPROACH 121, , , , ,076 CORPORATE FINANCE RESEARCH AND ADVISORY TRADING AND SALES CUSTODY ASSET MANAGEMENT STANDARDISED APPROACH - Risk Capital Capital OVERHEAD EXPENSES (Year 2015) Charge % Requirement 3. EXPENDITURE BASED APPROACH 80, ,007 CAPITAL REQUIREMENT FOR OPERATIONAL RISK - Higher of 1 & 3 20,076

23 App VII: Disclosure on Liquidity Risk S. No. Indicators Inference 1 Liquid assets / Total Assets 64.1% 63.7% This reflects the cushion/comfort level in meeting its short-term liabilities and fixed cost payment 2 Illiquid +Long term investments/total Assets 33.3% 36.3% 3 Cumulative Mismatch as a % of total liabilities (excluding equity) 788% 768% This ensures long-term sustainable returns on asset and provides stabilization of income in future years This reflects that the Company has no significant short term liabilities and earning assets are funded by equity. MATURITY PROFILE OF FINANCIAL ASSETS AND LIABILITIES AS ON DEC Particulars 1 Day > 1 day to 1 week >1 week to 1 month >1 month to 3 months >3 months to 6 months > 6 months to 1 year > 1 year Non Maturity ASSETS Cash and cash equivalents 26, ,000 - Shot term investments - - Prepaid Expenses Available for Sale Investment 19, ,195 Property & Equipment - 8,940 Accounts receivable 19,417 - Accrued Income & Others - - Total Assets 26, ,208 19, , ,135 LIABILITIES Accrued and other current liabilities ,139 7,191 2,863 4, Zakat and Income Tax Payable - 13,581 Employee terminal benefits - 29,675 Equity - 699,313 Total Liabilities & Equity ,139 7,191 16,444 4, ,988 Maturity Gap 26,931 (787) 438,069 12,420 (16,157) (4,039) 19,416 (475,853) Cumulative Maturity Gap 26,931 26, , , , , ,853 -

24 MATURITY PROFILE OF FINANCIAL ASSETS AND LIABILITIES AS ON DEC Particulars 1 Day > 1 day to 1 week >1 week to 1 month >1 month to 3 months >3 months to 6 months > 6 months to 1 year > 1 year Non Maturity ASSETS Cash and cash equivalents 36, ,000 - Shot term investments 100, ,000 Prepaid Expenses Available for Sale Investment , ,230 Property & Equipment - 9,497 Accounts receivable 13,262 - Accrued Income & Others Total Assets 36, , ,321 18, ,727 LIABILITIES Accrued and other current liabilities ,585 3,904 1, Zakat and Income Tax Payable - 16,114 Employee terminal benefits - 26,180 Equity - 681,046 Total Liabilities & Equity ,585 20,018 1, ,226 Maturity Gap 36,631 - (554) 205, ,303 16,376 - (439,499) Cumulative Maturity Gap 36,631 36,631 36, , , , ,499 -